Variations and indulgence clauses — avoiding inadvertent release of guarantees
The law of guarantees is complex and, in the heat of a commercial deal, it is all too easy to inadvertently release a surety to the detriment of yourself or your client. What are the key principles of which all transacting parties should be aware, and how can you get a current deal done without discharging an underlying liability?
It might seem trite to say, but a guarantor’s liability is contingent upon the underlying obligations it has guaranteed. If those underlying obligations are altered, the guarantor can be released. When primary contracting parties want to move forward with their commercial objectives, all too often contractual terms are tweaked, payments or loan facilities are changed, commercial concessions or practical arrangements are made, and guarantees are therefore inadvertently discharged. The law in this area is full of subtleties and it is difficult to draw a clear line as to the circumstances in which changing commercial deals can proceed safely, and those in which guarantors will be released. In the wake of a Court of Appeal decision on the topic, it is helpful to review the law and the potential pitfalls…
If you are registered and logged in to the site, click on the link below to read the rest of the Walker Morris briefing. If not, please register or sign in with your details below.
Sign in or Register to continue reading this article
It's quick, easy and free!
Why register to The Lawyer
More relevant to you
News from Walker Morris
News from The Lawyer
Briefings from Walker Morris
Looking at barriers to the development of effective cross-border e-commerce in the EU.
Which? has lodged a super-complaint in relation to concerns about misleading and unclear pricing practices in the groceries sector.
Analysis from The Lawyer
Which firms are cutting it in this era of slimline rosters, and who are the GC new brooms making clean sweeps? The Lawyer can reveal all
The law school war shows no signs of ending. But we have, perhaps, reached the end of the beginning.